B of A, PNC Pitch E-Payments to the Health-Care Industry

Bills, Steve, American Banker

Two of the nation's largest cash management banking companies are trying to become leaders in the emerging field of automating health-care payments.

PNC Financial Services Group Inc. has built a remittance system for the Department of Veterans Affairs, the largest integrated health-care provider in the United States. Bank of America Corp. is using FleetBoston Financial Corp.'s technology to develop a network of health-care companies using its electronic invoicing system.

The separate initiatives hold out the promise of automation to transform a fragmented, paper-based process.

Much of the activity is being propelled by the Health Insurance Portability and Accountability Act of 1996, which set electronic transaction standards for doctors, hospitals, insurers, and others in the field of health care. Perhaps most important from a payment perspective is the development of standardized codes, as mandated by the 1996 law, to identify transactions, providers, payers, and employers.

James G. Graham, an executive vice president and the division executive of treasury management at PNC, said it used its extensive experience in health-care payments to win the Veterans Affairs contract.

For most of the past decade, in addition to working with private-sector companies, PNC has provided lockbox services to the Indian Health Service, an arm of the Department of Health and Human Services, Mr. Graham said in an interview this month. "We do a lot of this kind of processing in the health-care space."

In 2002, PNC won a Veterans Affairs contract to automate processing of the 10 million reimbursement claims the department submits annually for veterans' nonservice-related health care.

Under the old process, an insurer paid each claim by mailing a paper check, with the associated explanation of benefits, directly to an individual medical center, where the payment was posted to the accounts receivable system and applied to the center's operating budget.

The new system, which the department began using in October, allows the payer to electronically instruct its bank to send the payment via automated clearing house to PNC, which acts as the lockbox bank. …

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